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A court decision could mean that hundreds of real estate agents in Victoria will be forced to repay millions of dollars in commissions.
The Exclusive Sales Authority (ESA) form, offered by the REIV, has been found by the Supreme Court to be non-compliant with the Estate Agents Act.
This decision has exposed the roughly 5,000 estate agents represented by the REIV who sold the forms as a legally binding vendor contract, giving the agent authority to sell a vendor’s home.
The flaw in the contracts was exposed by a County Court ruling against a Ray White St Albans agent in 2017, who had unsuccessfully sued the vendors for a $385,000 commission following an $8.8 million sale of a six-hectare industrial site.
The court ruled that the shortened ESA used by the agent included an amendment on the commissions statement and rebates that did not comply with the Estate Agents Act.
The ESA, which were approved by the director of Consumer Affairs Victoria (CAV), did not include the full wording of the rebate statement in section 49A of the act.
The REIV currently offers two versions of the ESA form to agents; the longer version has the full wording of the rebate statement as stated in section 49A, whereas the shortened one does not.
An appeal was lodged, but earlier this year, the Supreme Court upheld the County Court judgment which has now set a precedent for sellers to get back commissions.
In a statement posted to the REIV website, the body said that it was working with Consumer Affairs to find a solution to the mistake.
“When made aware of the issue last year, the REIV advised members and immediately took steps to change its authority documents in line with the County Court’s decision.”
The REIV also stressed that it was not the sole producer of the documents and said that agents always need to comply with the law.
“The REIV is not the sole producer of authority documents. All real estate agents in Victoria should ensure that all authority documents they are using of whatever form and from whatever source comply with the law.”
Ray White has stood behind the St Albans office and said that the office used the same forms that other agents had used in the past.
“The office involved in this case followed the same process that has been widely used by agents for several decades, using forms purchased from the Real Estate Institute of Victoria that are authorised by the Director of Consumers Affairs Victoria,” Ray White said.
Ray White stressed that no consumers had been disadvantaged by the technical breach.
“We note that consumers have not been disadvantaged by the technical breach exposed by this finding. Although a rebate disclosure form was not completed, no rebate was in fact involved in this transaction, nor any unforeseen expenses charged to the client.”
John Gdanski, from SLF Lawyers, said that he had issued writs to CAV and the REIV as both parties had breached their legal obligations.
“We are in the middle of litigation, but it is very early stages,” the lawyer said.
Mr Gdanski believes they have a very strong case and said that other agents should follow their lead.
“We think we have a very strong case. We think agents should be doing exactly what we are doing,” the lawyer said.
A Consumer Affairs Victoria spokesperson said the onus is on the agents to ensure they comply with the Estate Agents Act.
"The County Court decision in Advisory Services Pty Ltd v Augustin & Anor [2017] VCC 1195 handed down on 29 August 2017 affirmed the responsibilities of agents to comply with all requirements of section 49A of the Estate Agents Act 1980 (the Act) in order to claim commission in respect of a property sale.
"Consumer Affairs Victoria proactively highlighted the outcome of this case to real estate agents in Victoria, and reminded them to include all the requirements of section 49A of the Act," they said.
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